Greenberg Traurig, Heller Ehrman settle malpractice suit

Greenberg Traurig has agreed to pay $4.9 million to settle a lawsuit accusing it of malpractice.

First, some background. In 2011, the now-defunct law firm Heller Ehrman sued Greenberg, claiming its negligence contributed to Heller’s spiral into dissolution in December 2008. According to Heller, when it hired Greenberg in June 2008, Greenberg didn’t disclose that it also separately represented Bank of America Corp. (BofA), which for 17 years had lent Heller millions of dollars. Heller claimed Greenberg failed to discover that BofA had terminated its security interest in Heller before the law firm dissolved.

“Had Heller been alerted to this key fact at the time of its dissolution, Heller could have filed for bankruptcy and prevented its banks from seizing tens of millions from the firm and forcing Heller to try to wind-down in a chaotic, disorderly posture,” Heller said in its lawsuit, in which it sought “tens of millions of dollars,” according to the Wall Street Journal Law Blog.

Yesterday, the two parties reached a settlement agreement in which Greenberg agreed to pay Heller $4.9 million to settle the allegations, which it denies are true.

“We are confident that had the matter continued, there would have been a finding that our attorneys had acted properly and in our client’s best interest,” Greenberg spokeswoman Jill Perry told the Law Blog.

The settlement will move forward if a bankruptcy judge approves it next month.